1

issn: 2546-1524 jan–jun 2017

a biannual publication of the Foreign service institute, , center for international relations and strategic studies (cirss)

InsIde thIs Issue

What the ASEAN Chairmanship Means for the Philippines and the Page 6

Explaining US and China’s Views on Freedom of Navigation Page 10

Parsing Abe’s Official Visit: Change or Continuity in Philippines-Japan Relations under the Duterte Administration? Page 16 Contents

On the Horizon Editorial Team ASEAN Project Directors Claro S. Cristobal 3 What the ASEAN Chairmanship Means Julio S. Amador III

for the Philippines and the Filipinos Editors jeremie p. credo Ma. Anna Rowena Luz G. Layador 5 ASEAN Updates: January–March 2017 Rhodora M. Joaquin Valerie Anne Jill I. Valero Maritime Security Virgemarie A. Salazar 10 Explaining US and China’s Views Layout Kaye Anne P. Argete on Freedom of Navigation Darlene V. Estrada Mary Fides a. Quintos Edcel John A. Ibarra 12 Lessons of Functionalism for Functional Cooperation in the South China Sea edcel john a. ibarra Center for International 14 CIRSS Maritime Section: Events Relations and Strategic Philippine Relations Studies By mandate of the Philippine Foreign 16 Parsing Abe’s Official Visit: Service Act of 1991, or R.A. 7157, the FSI maintains a Center for International Change or Continuity in Philippines-Japan Relations and Strategic Studies (CIRSS). Relations under the Duterte Administration? CIRSS undertakes studies in support of the valerie anne jill i. valero formulation, review and dissemination of Philippine foreign policy. It also organizes Looking Ahead conferences, round table discussions (RTD), lectures, and forums as channels for interaction, cooperation and integration 19 Philippine Economic Outlook of the efforts of local and foreign experts Rowell G. Casaclang & Jovito JOSE P. Katigbak from government, private and academic sectors on foreign policy issues and their In Focus domestic implications. Area Studies Sections 23 ASEAN-India Renewable Energy Traditional Security Studies Section Non-Traditional Security Studies Section Cooperation: Opportunities and Challenges International Organizations Section ASEAN Programs Section for the Region and the Philippines Special Projects Section jemimah joanne c. villaruel

The views and analyses expressed herein are those of the authors and do not necessarily Cover photo: Modified “Fuller World Map Projection” by Eric Gaba (https://commons. reflect the positions of the Foreign Service wikimedia.org/wiki/User:Sting/Gallery:_Maps_of_the_world,_of_seas_and_ Institute or the Department of Foreign Affairs. about_history#/media/File:Fuller_projection.svg) licensed under CC BY-SA 2.5. 3 on the HORIZON • asean

What the ASEAN Chairmanship Means for the Philippines and the Filipinos

jeremie p. credo

he Association of Southeast Asian Nations (ASEAN) will development, conservation of the environment, and people- T be a half-century old this 2017, with the Philippines at to-people exchanges. Thus, ASEAN under the Philippines’ the helm steering the region’s agenda. This year will be the Chairmanship will likely entail more engagements in these areas Philippines’ fourth time to be ASEAN Chair. The last ASEAN and in issues of growing concern such as trade in illegal drugs, Summit it hosted was in 2006 under the leadership of former terrorism and violent extremism, and trafficking in persons. President Gloria Macapagal-Arroyo. Political-Security Community The Philippines’ chairmanship, however, will not only be about President ’s administration has opted for a more the ASEAN Summit meetings and the festivities and fanfare to holistic approach to regional issues by putting equal importance commemorate the Association’s golden anniversary. Throughout to political, economic, and socio-cultural aspects necessary to the year, officials from all ASEAN Member States and Dialogue achieve the goals set by the ASEAN Vision 2025. Partners are crafting new agreements, declarations, and work plans, and are conducting technical studies and workshops. The Managing the South China Sea disputes and promoting the aims of these are to: 1) strengthen regional cooperation across rule of law will remain a priority for the Philippines, with the political-security, economic, and socio-cultural pillars; and the continued push for the conclusion of a framework and the ultimately 2) to improve the lives of every ASEAN citizen under actual Code of Conduct (COC), as well as the full and effective a people-centered and people-oriented ASEAN Community. implementation of the Declaration on the Conduct of Parties in the South China Sea (DOC). Discussions on maritime security For the Philippines, being the Chair provides opportunities to in ASEAN will also continue to focus on practical cooperation in showcase the country’s beautiful islands and tourist destinations, dealing with piracy and other transnational crimes that operate in its rich heritage and culture, and the Filipino people’s artistry the region’s waters. This will be vital in maintaining unimpeded and warm hospitality. It is also an occasion for the Philippines shipping and seaborne trade toward economic growth in the to boost its diplomatic profile and raise its advocacies and region. Indeed, maritime security and cooperation is only one interests. For instance, Philippine Chairmanship in 2006 gave of the six priorities of ASEAN under the Philippines’ leadership, us an opportunity to highlight the importance of an ASEAN as the country seeks to promote greater cooperation among “one caring and sharing community.” But more importantly, it is Member States in promoting peace and stability, inclusive and also an opportune time for the Philippine government to further innovation-led growth, resilience, among others. increase ASEAN awareness and understanding among Filipinos, which will be critical towards the realization of a “we” feeling or Combating narcotic drugs, given their proliferation and a common identity and in building an inclusive and caring and adverse effects to the society, has been taken up by the Duterte sharing society. administration as a priority. This problem is shared regionally, with countries such as Singapore and Indonesia calling for a Opportunities for 2017 tougher stance in addressing the issue.1 Moreover, the World As a founding member of ASEAN, the Philippines has played a Drug Report 2016 of the UN Office on Drugs and Crime role in pursuit of the Association’s goal of maintaining peace, (UNODC) has identified Thailand, Malaysia, and the Philippines stability, and prosperity in the region. It has participated and as transit countries for drug trade, making Southeast Asia initiated cooperative efforts in areas such as poverty eradication, vulnerable to drug trafficking.2 The issue on drugs, therefore, economic advancement, protection of the rights of migrant requires coordinated approaches at the national and regional workers and the rights of women and children, human resource levels. The chairmanship of ASEAN will be an opportunity 4 on the HORIZON • asean

BIMP-EAGA covers the entire sultanate of Brunei, provinces of Filipinos should be Kalimantan, Sulawesi, Maluku, and West Papua of Indonesia; the states of Sabah and Sarawak, and Labuan in Malaysia; and the empowered to take pride and Mindanao island and Palawan province in the Philippines. The acceleration of economic development in these areas that are feel co-ownership of ASEAN geographically distant from national capitals could be a means to promote inclusivity and sustainability across all sectors of along with other peoples society. The Philippines therefore has plenty to gain once this initiative gains traction. of Southeast Asia for them Socio-cultural Community to be able to participate Apart from the political and economic issues identified, it is high time that ASEAN provides a regional regulatory or institutional in the ASEAN Community framework on the protection and promotion of the rights of migrant workers. The Philippines, as a country with many of building process. Only then its nationals working overseas, spearheaded the adoption of a declaration on migrant workers’ rights during its Chairmanship can the vision of a caring and of ASEAN in 2006. With the growth of intra-ASEAN migration, there have been, undeniably, challenges on irregular migration, sharing, people-oriented, recruitment abuses, and exploitation of migrants who are often without access to legal protection. The Philippines’ proactive and people-centered ASEAN stance on this issue must therefore bear fruit while it chairs the Association. Community be realized. The Filipinos and ASEAN For the past 50 years, ASEAN has brought numerous, though at times intangible and underappreciated, benefits to the peoples for the Philippines to pursue engagements at the bilateral and of Southeast Asia, including the Filipinos. For the Philippines, multilateral levels towards realizing a drug-free region. being the Chair during the golden anniversary of ASEAN is a testament to the country’s commitment to regional peace, Another area of concern that will be given focus this year stability, and prosperity. The country is not only a founding will be the threat of terrorism and violent extremism. With member, but remains an active contributor to the Association’s the unending secessionist movements in the Philippines and continuing narrative. However, as the Chair, the Philippines in southern Thailand, as well as the risk of the spread of the should also see to it that every Filipino is cognizant of the value Islamic State’s influence in Southeast Asia, radical extremism of the country’s membership in ASEAN and ASEAN to the in the region is heating up cross-border terrorist threats. This Philippines. Thus, the Philippine government should present puts further pressure on national governments and ASEAN to an ASEAN that is easily understandable to every Filipino across prevent and counter terrorism requiring a holistic approach to all sectors of the society. Filipinos should be empowered to include initiating social discourse on extremism, strengthening take pride and feel co-ownership of ASEAN along with other community engagements, and improving social services for the peoples of Southeast Asia for them to be able to participate in people, among others. the ASEAN Community building process. Only then can the vision of a caring and sharing, people-oriented, and people- Economic Community centered ASEAN Community be realized. Economic integration, as highlighted by the establishment of the ASEAN Economic Community (AEC) in 2015, has positioned the region for further economic advancement to become the 1 Louis Charbonneau, “Singapore slams calls for ‘soft approach’ to drugs at UN sixth largest economy in the world. For the Philippines, it seeks meeting,” The Sydney Morning Herald, April 21, 2016, http://www.smh.com.au/ to contribute to the goals set by AEC by revitalizing intra- world/singapore-slams-calls-for-soft-approach-to-drugs-at-un-meeting-20160420- gobfqv.html (accessed 30 March 2017). regional trade and connectivity in sub-regional cooperation, 2 United Nations Office on Drugs and Crime. World Drug Report 2016. http://www. particularly in the Brunei Darussalam-Indonesia-Malaysia- unodc.org/doc/wdr2016/WORLD_DRUG_REPORT_2016_web.pdf (accessed 30 Philippines East ASEAN Growth Area (BIMP-EAGA). The March 2017). 5 on the HORIZON • asean

ASEAN 2017 Updates

january–march 2017

Launch of the Philippines’ ASEAN Chairmanship

The Association of Southeast Asian Nations (ASEAN) is celebrating its 50th anniversary this 2017 with the Philippines taking the lead as the Chair. On 15 January 2017, the Philippines officially launched its chairmanship, held at the SMX Convention Center in Davao City. President Rodrigo Roa Duterte gave a keynote address emphasizing the theme “Partnering for Change, and Engaging the World,” as well as the six thematic priorities. He also encouraged Filipinos to actively and constructively participate in the Philippine chairmanship through the spirit of bayanihan. Also launched during the event were the commemorative stamps, coins, and the ASEAN 2017 song entitled “ASEAN Spirit.” PPD / ASEAN - NOC

Philippine President Rodgrigo Duterte and former Secretary of Foreign Affairs Perfecto R. Yasay, Jr. (6th and 7th from the right respectively) pose for a photo together with the Ambassadors of ASEAN Member States during the launch of the Philippines’ chairmanship of the ASEAN on 15 January 2017 in Davao City. PPD / ASEAN - NOC PPD / ASEAN - NOC

President Rodgrigo Duterte spearheads the symbolic Together with Philippine Postmaster General Joel Otara, unveiling of the ASEAN 2017 Commemorative Coin President Duterte reveals a Special Stamp designed to issued by the Bangko Sentral ng Pilipinas (BSP). commemorate the 50th anniversary of ASEAN. 6 on the HORIZON • asean

23rd Meeting of the ASEAN Intergovernmental Commission on Human Rights (AICHR)

The Philippines hosted the 23rd meeting of AICHR on 13–15 February 2017 in Boracay. Chaired by Philippine AICHR representative Leo Herrera-Lim, the meeting discussed upcoming projects and commemorative activities as part of ASEAN’s 50th anniversary. The meeting also identified judiciary and human rights, access to education, access to safe drinking water and sanitation, and attainment of the Sustainable Development Goals (SDGs) as new priority areas. The Philippines also proposed two projects for AICHR, namely: 1) a thematic study on the protection of the rights of women during natural disasters; and 2) the conduct of another workshop on developing legal instruments on human rights in ASEAN.

First caucus of the ASEAN Intergovernmental Commission on Human Rights (AICHR) led by the Representative of the Philippines to the AICHR, Leo Herrera-Lim (sixth from the left). PPD / ASEAN - NOC

ASEAN Ministerial Meeting Retreat (AMM)

The ASEAN Foreign Ministers, along with ASEAN Secretary General Le Luong Minh, gathered for a retreat in Boracay, Philippines on 19–21 February 2017. Chaired by then Philippine Secretary of Foreign Affairs Perfecto R. Yasay, the ministers discussed the six thematic priorities for 2017, as well as the implementation of the ASEAN ASEAN Foreign Ministers convene for the ASEAN Community Blueprints toward the realization of an ASEAN Community Vision 2025. Foreign Ministers’ Retreat (AMM Retreat) 2017 under the Chairmanship of the Philippines, The Ministers also discussed issues of common concern, including the developments hosted and chaired by former Foreign Affairs in the South China Sea and the Korean Peninsula, while emphasizing the need for Secretary Perfecto Yasay Jr. (sixth from the left). ASEAN centrality and unity. PPD / ASEAN - NOC 7 on the HORIZON • asean

ASEAN Labor Ministers’ Retreat and the 10th ASEAN Committee on Migrant Workers Meeting (ACMW)

The Department of Labor and Employment (DOLE) hosted the ASEAN Labor Minsters’ Retreat and the 10th ASEAN Committee on Migrant Workers Meeting on 19–22 February in Davao City. The Labor Minsters and their senior officials reviewed the 2007 ASEAN Declaration on the Protection and Promotion of the Rights of Migrant Workers, particularly on issues affecting the rights of migrant workers, undocumented workers, and the rights of their family members. This is in preparation for the finalization of an instrument on the protection and promotion of the rights of migrant workers, which is one of the outcome documents that the Philippines is spearheading under its Chairmanship. PPD / ASEAN - NOC

ASEAN Senior Labor Ministers pose with the signature ‘ASEAN handshake’ during the second day of the ASEAN Labor Minsters’ Retreat at Marco Polo Hotel in Davao City. The Retreat was chaired by the Department of Labor and Employment (DOLE) Secretary Silvestre H. Bello III (fifth from left).. PPD / ASEAN - NOC

Delegates join hands for a photo during the 10th ASEAN Committee on Migrant Workers Meeting in Davao City.

22nd Senior Officials Committee for the ASEAN Socio-Cultural Community (SOCA) and 17th ASEAN Socio-Cultural Community Council Meeting

The Department of Social Welfare and Development (DSWD) hosted the 22nd Senior Officials Committee for the ASEAN Socio-Cultural Community Meeting and 17th ASEAN Socio-Cultural Community Council Meeting on 6–7 March and 8–9 March 2017, respectively, at the Iloilo Convention Center, Iloilo City. The officials discussed the monitoring and evaluation of ASEAN Socio-Cultural programs and the endorsement of ASEAN Leaders’ Declaration on the Role of Civil Service as Catalyst for Achieving ASEAN Community Vision 2025. PPD / ASEAN - NOC

The 22nd SOCA Meeting chaired by the DSWD Secretary highlighted that under the Philippine chairmanship, Department of Social Welfare and Development ASCC seeks to focus on nurturing human, cultural, and natural resources for sustained Undersecretary Florita R. Villar, Philippine SOCA development in a harmonious and people-oriented ASEAN. It also seeks to forge a Leader and ASEAN Deputy-Secretary General common identity and build a caring and sharing society that is inclusive and where the for ASCC, Mr. Vongthep Arthakaivalvatee. well-being, livelihood, and welfare of the peoples are enhanced. 8 on the HORIZON • asean

Department of Social Welfare and Development (DSWD) Secretary Judy M. Taguiwalo (front row, fifth from left) with the delegates for the 2017 ASEAN Socio-Cultural Community (ASCC) Council Ministers held on 8–9 March 2017 at the Iloilo City Convention Center. PPD / ASEAN - NOC

ASEAN Economic Ministers (AEM) Retreat and Related Meetings

The Department of Trade and Industry (DTI) hosted the 23rd ASEAN Economic Ministers Retreat and Related Meetings on 8–10 March 2017 in Pasay City. Apart from the Economic Ministers, the meetings were also attended by ASEAN Business Advisory Council (ASEAN-BAC) and the EU-ASEAN Business Council. The meetings emphasized the importance of implementing the ASEAN Economic Community Blueprint 2025 in driving the region’s economic agenda. The meetings also advocated the conclusion of the Regional Comprehensive Economic Partnership (RCEP) by the end of the year. These are all aimed at increasing trade and investment, developing innovation-driven economies, and integrating the region’s micro, small and medium enterprises (MSMEs) into the global value chains. PPD / ASEAN - NOC

Department of Trade and Industry (DTI) Secretary Ramon M. Lopez (sixth from left) chairs the 23rd ASEAN Economic Ministers’ (AEM) ASEAN Joint Consultative Meeting (JCM) Retreat Meeting and Related Meetings held on 9 March 2017 at the Conrad , Pasay City. The ASEAN Joint Consultative Meeting (JCM) and Related Meetings were held on 14–16 March 2017 at the Philippine International Convention Center in Manila. The JCM gathered all senior leaders from the three ASEAN Community Councils (Political-Security, Economic, and Socio-Cultural), the Committee of Permanent 9 on the HORIZON • asean

Representatives (CPR) to ASEAN, and other officials from all 10 Member States to discuss proposed outcome documents for the year and preparations for the 30th ASEAN Summit in April. The senior officials also exchanged views on how to improve the role of JCM in coordinating activities and programs for issues that cut across the different pillars of the ASEAN Community.

Senior Delegates of ASEAN Community Councils gather in the ASEAN Joint Consultative Meeting and Related Meetings at the Philippine International Convention PPD / ASEAN - NOC Center (PICC,) 16 March 2017.

Mangrove Forum on the Philippines’ Chairmanship of ASEAN

The Foreign Service Institute hosted a Mangrove Forum on International Relations titled: “The Philippines’ Chairmanship of ASEAN” on 24 January 2017 at the Sofitel Philippine Plaza, Pasay City. The keynote address was given by Hon. Enrique A. Manalo, DFA Undersecretary for Policy and Senior Officials’ Meeting (SOM) Leader. In his presentation, he explained the Philippines’ chairmanship theme and the six priorities for 2017.

This was followed by a dynamic discussion with a panel consisting of Assistant Secretary Ma. Hellen B. de la Vega of the DFA Office of ASEAN Affairs and Mr. M.C. Abad, Jr. of the Institute of Strategic and Development Studies (ISDS). The open forum covered issues such as the future of ASEAN centrality, the Code of Conduct in the South China Sea, Timor Leste’s proposed membership in ASEAN, trade in illegal drugs, protection of migrant workers, and rise of populism in many countries.

The Mangrove Forum was attended by participants from government agencies, diplomatic corps, academe, military and police, and media.

The Foreign Service Institute holds Mangrove Forum ASEAN Chairmanship. From left to right: Dr. Elizabeth L. Enriquez, DFA-Office of ASEAN Affairs Assistant Secretary Maria Hellen de la Vega, DFA Undersecretary , FSI Director-General Claro A - OPD

D F S. Cristobal, and Mr. M.C. Abad, Jr.

Representatives from government agencies, members of the diplomatic corps, academe, military and police officials, and media A - OPD attended the Mangrove Forum. D F 10 on the HORIZON • maritime security

Explaining US and China’s Views on Freedom of Navigation

Mary Fides A. Quintos

he United Nations Convention on the Law of the Sea Conversely, China believes that activities related to freedom of T (UNCLOS) is regarded as the constitution of the world’s navigation and overflight, specifically those that are military- oceans, providing rules and guidelines on the rights and related, should have prior consent or implied consent of the responsibilities of states in various maritime zones. UNCLOS, coastal state, as they can threaten the peace and sovereignty of however, provided no concrete definition of freedom of such state.6 In particular, the collection of data that can be used navigation; thus resulting in differing interpretations of states, to support military operations against the territorial integrity particularly the US and China, on whether or not specific or political independence of a particular state is a violation of activities such as military exercises, naval maneuvers, or Article 301 of UNCLOS.7 It is for this reason that the Surveying military weapons testing are included in the right of freedom and Mapping Law of China in 2002 requires all surveying and of navigation in the exclusive economic zone.1 The absence of a mapping activities in the air, land, and sea areas under China’s common understanding of this concept results in incidents at sea jurisdiction to be subject to approval.8 This law clearly applies that increase tension in the region. to all kinds of survey activities, including hydrographic surveys and military intelligence surveys, which imply that while China The US maintains that even if it has not ratified the UNCLOS, recognizes certain activities related to freedom of navigation, many of its provisions have already been customary international it does it under the consent regime, which is not acknowledged law and state practice. The US position on its rights in the EEZ by the US. can be summarized as follows: (1) “that waters seaward of the territorial sea are international The US and China have already been involved in several incidents waters where high seas freedoms of navigation and overflight at sea due to their divergent interpretations of their rights in and other internationally lawful uses of the seas related to the EEZ: the Bowditch incident (2001), the collision of a US those freedoms can be exercised”; aircraft and Chinese fighter jet in Hainan Island (2001), and the (2) “that military activities should be defined within navigation Impeccable incident (2009). In December 2016, the US also and overflight freedoms in an EEZ and such freedoms should protested China’s seizure of a US underwater drone engaged in not be impeded by coastal states”; and military activities in the Philippines’ EEZ. US navy warships (3) “that hydrographic surveys should be distinguished from have also been deliberately sailing near Chinese-occupied marine scientific research, thus, should not be regulated in features in the South China Sea through freedom of navigation the consent regime.”2 operations; challenging China’s requirement of consent prior to transit and also objecting to its excessive maritime claims.9 In addition, experts3 argued that a coastal state has no residual China called these US actions illegal and a threat to China’s rights in the EEZ except those stated in Article 56 of UNCLOS, sovereignty and security interests.10 which is limited to the utilization of living and non-living resources, the establishment of artificial islands and installations, The US defines the area seaward from the territorial waters as marine scientific research, and marine environment protection. international waters, and it is concerned with the preservation The US has also long endorsed the principle that “whatever is of the freedom of navigation to ensure the mobility of its navies not prohibited by law is permitted,”4 and therefore all other and continued strategic presence in East Asia. Meanwhile, China activities at sea outside Article 56 are allowed for user states, wants to regulate all maritime activities to protect both its with due regard to the aforementioned rights of the coastal economic and security interests. As the US intends to exercise state.5 the wider freedoms of customary international law, China wants USS Theodore Roosevelt, guided-missile destroyer USS Lassen, and guided-missile cruiser USS Normandy sail through the South China Sea. U.S. NAVY

to limit such freedoms through the promulgation of its domestic 2 Yang Fang, “Exclusive Economic Zone Regime in East Asian waters: military and laws that require consent for maritime activities. Until the intelligence-gathering activities, marine scientific research, and hydrographic surveys problem of what constitutes freedom of navigation is resolved in an EEZ”, S. Rajaratnam School of International Studies Working Paper No. 198, and the two countries find a common ground to accommodate (May 2010), Available in www.rsis.edu.sg/publications/WorkingPapers/WP198.pdf, 3 Raul Pedrozo, “Military Activities in the Exclusive Economic Zone: East Asia Focus”, each other’s interests, maritime incidents involving them are International Law Studies US Naval War College, 2014, Vol. 90; Robert Beckman, unavoidable. “Rights and Responsibilities of States on the High Seas and Exclusive Economic Zone”, (May 2014), in his presentation at the 2nd ASEAN Regional Forum Seminar Different interpretations of key concepts of UNCLOS is not on the UNCLOS, Manila, Philippines; Ashley Roach, “Freedom of Navigation and unique to the US and China - other states in the region could Overflight”, (May 2014), in his presentation at the 2nd ASEAN Regional Forum Seminar on the UNCLOS, Manila, Philippines also be confronting the problem of interpretation. The lack 4 James Houck and Nicole Anderson, “The United States, China, and Freedom of of a common understanding of freedom of navigation creates Navigation in the South China Sea”, Washington University Global Studies Law misperceptions of other states’ intentions and heightens the Review, Vol. 13, Issue 3 (2014), Available in http://openscholarship.wustl.edu/cgi/ risk of miscalculation at sea, causing incidents that pose grave viewcontent.cgi?article=1495&context=law_globalstudies 5 threats to the security of important sea lanes of communication, J. Ashley Roach and Robert W. Smith, United Stated Responses to Excessive especially in the South China Sea. Arriving at a definition and Maritime Claims, 1996, Brill: Leiden, Netherlands 6 Yang Fang, 2010 agreed parameters of activities associated with freedom of 7 James Houck and Nicole Anderson, 2014 navigation can be a fruitful contribution to peace and stability 8 Surveying and Mapping Law of the People’s Republic of China, Art. 2, http:// in the region. en.sbsm.gov.cn/article//LawsandRules/Laws/200710/20071000003241.shtml 9 https://amti.csis.org/south-china-sea-fonop-2-0-a-step-in-the-right-direction/ 10 Ministry of the People’s Republic of China, “Foreign Ministry Spokesperson Lu Kang’s Remarks on USS Lassen’s Entry into Waters near Relevant Islands and Reefs of China’s Nansha Islands”, 27 October 2015, Available from http://www.fmprc.gov.cn/ mfa_eng/xwfw_665399/s2510_665401/2535_665405/t1309567.shtml; Ministry 1 Abdul Ghafur Hamid and Khin Maung Sein, “Striking a Balance between the Rights of the People’s Republic of China, “Foreign Ministry Spokesperson Hua Chunying’s of a Coastal State in its Exclusive Economic Zone and Freedom of Navigation of Other Remarks on US Warship’s Uninvited Entry into Chinese Territorial Waters off Xisha States: A Critical Analysis,” Asian Journal of International Law, vol.2 (2007), 14, Islands”, 21 October 2016, Available from http://www.fmprc.gov.cn/mfa_eng/ Available in http://staff.iiu.edu.my xwfw_665399/s2510_665401/2535_665405/t1408234.shtml

The lack of a common understanding of freedom of navigation creates misperceptions of other states’ intentions and heightens the risk of miscalculation at sea, causing incidents that pose grave threats to the security of important sea lanes of communication, especially in the South China Sea. 12 on the HORIZON • maritime security

n September 2016, ASEAN and China agreed to apply the I Code for Unplanned Encounters at Sea (CUES) to the South China Sea and established the guidelines for a hotline for maritime emergencies between their ministries of foreign affairs. In the following month, China and the Philippines agreed to undertake cooperation between their coast guards on maritime search and rescue, marine environmental protection, and transnational crimes. These initiatives, made just a few months after the release of the ruling on Philippines v. China in July, are recent examples pointing to a trend of pursuing functional cooperation as a way of managing tensions among the claimant-states in the South China Sea.

In examining functional cooperation, however, the focus should Lessons of not only be on the functional (i.e., specialized or technical) issue- areas but also on how it was originally conceptualized under the framework of functionalism. This relationship is largely Functionalism ignored, but it must nonetheless be reexamined to understand the theory behind functional cooperation and, accordingly, for Functional improve practice for the South China Sea. Functionalism1 argues that states would cooperate first and Cooperation fastest on functional areas, which are matters for government regulation requiring specialized, expert knowledge and, as such, do not normally attract much political disagreement in the South among states. They are also usually matters that can only be most effectively and most efficiently managed beyond the China Sea national level. For functionalism, the non-controversial and supranational nature of functional areas makes states willing to cooperate on those matters. In addition, states would be Edcel John A. Ibarra willing to enter functional cooperation because it would help them fulfill their role as a provider of social services, which can often be functional in character. Due to the technical nature of functional areas, functionalism expects states to cooperate through specialized joint agencies.

Functionalism further argues that functional cooperation would produce peace in the international system and believes that the successful demonstration of cooperation on one functional area would increase the willingness of states to cooperate on other functional areas. (Neofunctionalism later called this “the logic of spill-over.”) Eventually, issues, including political matters like security, would be redefined functionally (i.e., in technical terms), thus paving the way for further functional cooperation. This in turn would nurture a habit of cooperation among states through active participation in jointly addressing a widening range of functional areas and consequently lessen their preference for conflict. The functional approach to peace is to keep states preoccupied with functional cooperation, hence a “working peace.” Conflict prevention is emphasized by setting aside issues under dispute before they ignite into violence and by focusing on functional areas where the parties could cooperate.

Functionalism, however, is already an old, if not outdated, theory. It was developed during World War II and flourished 13 on the HORIZON • maritime security

If functional cooperation pushes through, it should not be expected to automatically spill over and facilitate conflict resolution.

thereafter until its main prediction—the creation of various ongoing functional cooperation; therefore, states should still international institutions organized along functional lines—has explore and pursue conflict resolution strategies. been realized through the United Nations system. It fell further out of favor when, even with a multitude of functional agencies This does not mean that the parties should abandon functional already established, the world still yielded to the Cold War. It cooperation. If done carefully, functional cooperation can still has since been succeeded by neofunctionalism and neoliberal build confidence and enhance mutual trust. The South China institutionalism. Some relevant criticisms have been leveled Sea claimants have undoubtedly engaged in several functional against functionalism. First, it overemphasizes the willingness cooperative activities. The 2002 ASEAN-China Declaration on of states to cooperate even on supposedly technical and non- the Conduct of Parties in the South China Sea (DOC), para. political matters and to delegate authority to international 6, provides the framework for functional cooperation in the institutions for such purpose. Second, the lessons of cooperation South China Sea, especially on the following areas: marine from one functional area may not automatically transfer or “spill environmental protection, marine scientific research, safety over” to another functional area, especially political matters. of navigation and communication at sea, search and rescue Third, increased contact through functional cooperation could operations, and combatting transnational crimes. With the DOC create more room for disagreement just as well as it could build as the foundation, ASEAN and China eventually adopted the confidence and enhance mutual trust. agreements on the application of CUES to and the establishment of maritime emergency hotlines in the South China Sea. Aside Moreover, functionalism is not fundamentally a theory of from these, China, the Philippines, and Vietnam had previously conflict management, much less of conflict resolution; rather, also held a Joint Marine Seismic Undertaking (JMSU), and the it is more commonly cited today as a theory of international Philippines and Vietnam had conducted Joint Oceanographic organization or of regional integration. Indeed, the functionalist Marine Scientific Research Expeditions (JOMSRE), among approach to conflict management is not to directly manage others. Nonetheless, there are still numerous opportunities the conflict. In emphasizing functional cooperation, it has the for intensifying functional cooperation. For example, efforts tendency to ignore the root causes of conflict. This contrasts on marine environmental protection could eventually with other conflict management approaches that, for example, include creating a network of marine protected areas and, encourages the parties to clarify the issues under dispute by later, establishing a regional coordinating body on marine openly talking about them. environmental matters. Marine scientific research could also advance from short-term expeditions, like the JOMSRE, to Situating functional cooperation within the framework longer-term projects, such as establishing a network of marine of functionalism brings out some key but often neglected scientists and marine science institutions for joint researches implications that may be relevant to the South China Sea on the South China Sea, and forming a scientific data–sharing disputes. States may not be willing to cooperate on some center. functional areas, and pushing them into functional cooperation may only increase tension. This also means that states may Functional cooperation, however, must eventually progress be more willing to cooperate on some issues than on others, into political cooperation on resolving the disputes. This may and that their priorities may not always be congruent with not happen automatically. It may take a long time before states each other. Furthermore, should states agree into functional can be comfortable in talking about and settling their disputes. cooperation, it may not necessarily be realized without Until then, the best option may be to expand the scope and disagreement; after all, experts may not be able to agree on institutionalize functional cooperation to maximize its utility in certain technical issues. Thus, in undertaking functional confidence-building. But this should not be the end goal. As the cooperation, states must be able to manage, or else careful to parties deepen functional cooperation between them, they must avoid, potential points of disagreement that they cannot readily not lose sight of eventually having to work together directly on resolve. Finally, if functional cooperation pushes through, it dispute settlement. should not be expected to automatically spill over and facilitate conflict resolution. While functional cooperation can manage 1 See David Mitrany, A Working Peace System: An Argument for the Functional Development tensions, it cannot manage the cause, which, in the South China of International Organization, (London: Royal Institute of International Affairs, 1943). Sea, are the territorial and maritime disputes. So long as these See also Lucian M. Ashworth and David Long, eds., New Perspectives on International disputes remain unresolved, tensions could increase even with Functionalism (Hampshire: Macmillan, 1999). 14 on the HORIZON • maritime security

CIRSS maritime section

events

FSI, The Asia Foundation conduct seminar-workshop, Mabini Dialogue on marine environment protection

The Foreign Service Institute, with the support of The Asia Foundation, organized two back-to-back events on marine environment protection: a Seminar-Workshop on Coastal and Marine Environment Protection and the Role for ASEAN 2017 on 30–31 January 2017 at the Discovery Suites, Ortigas Center, Pasig City; and a Mabini Dialogue on the theme “Marine Environment Protection: A Multi-Level Perspective” on 1 February 2017 at the Carlos P. Romulo Library, Department of Foreign Affairs Bldg., Pasay City.

The seminar-workshop was conducted in partnership with the Department of Environment and Natural Resources–Biodiversity Management Bureau and with additional support from the US Department of State. It discussed the status of and prospects for marine environment protection at the national and regional levels, and identified possible initiatives, drawing from local and countrywide experiences, that the Philippines can champion in the region as ASEAN Chair for 2017. The event engaged experts and participants from various government agencies, international bodies, academic institutions, and non-government organizations. f oundation Seminar-workshop participants and role players pose for a photo on the first day the asia at the foyer leading to the venue.

The two-day seminar-workshop highlighted that economic development in the region largely depends on the health of its marine resources as the ocean is crucial not only for the transport of goods and services but also, and more importantly, for food security. Harmonization of laws, rationalization of mandates and institutions, and enhanced coordination at the national and regional levels are necessary to address threats to marine environment. The role of ASEAN is crucial not only in promoting and integrating efforts to protect the coastal and marine environment in the region, but also in solidifying the commitment of its member-states toward sustainable development.

After the seminar-workshop, FSI hosted a Mabini Dialogue, adding a global perspective into the conversation. It featured three international experts who had also lectured in the seminar-workshop: Dr. Liana Talaue-McManus, Project Manager of the Environment Program–Global Environment Facility Transboundary Waters Assessment Program; Ms. Cheryl Rita Kaur, Head of the Center for Coastal and Marine Environment at the 15 on the HORIZON • maritime security

Maritime Institute of Malaysia; and Dr. Mark J. Spalding, President of The Ocean Foundation.

The experts identified various threats to the marine environment at the national, regional, and global levels, and offered recommendations to address them. Dr. McManus focused on climate change as a global-level threat; Ms. Kaur considered the maritime disputes in the South China Sea as a regional-level threat; and Dr. Spalding f si reviewed other regional- and national-level threats, including illegal, unreported, The Ocean Foundation President Dr. Mark and unregulated fishing, illegal wildlife trade, and overdeveloped coastal areas. They Spalding (right), UNEP-GEF Transboundary proposed pursuing sustainable development at the national level and coordinating Waters Assessment Program Project with other states at the regional level (including repackaging marine environment Manager Dr. Liana McManus (center), protection as a confidence-building measure in the South China Sea) and the global and MIMA Center for Coastal and Marine level (including aligning with the UN Sustainable Development Goals). In particular, Environment Head Cheryl Kaur during the open forum at the Mabini Dialogue. the Philippines should take the opportunity to the lead efforts on marine environment protection in the region as ASEAN Chair for 2017.

CIRSS researchers participate in CSCAP Study Group on Marine Environment Protection

CIRSS researchers participated in the 3rd Meeting of the Council for Security Cooperation in the Asia Pacific (CSCAP) Study Group on Marine Environment Protection held on 6–8 February 2017 in Tokyo, Japan. The Study Group was proposed by CSCAP Philippines in 2015, in view of the importance of coral reefs in the Asia Pacific, being the region where there is a very high concentration of marine biodiversity and marine habitat, including corals. The subject on coral reefs can also effectively connect other issues such as marine endangered species, fishing, blue economy, climate change, among many others. f si The Philippine Team at the CSCAP Study The third meeting of the CSCAP Study Group built on the discussions made in the Group on Marine Environment Protection, meetings in Manila, Philippines in April 2016 and Qingdao, China in September 2016, with CIRSS Senior Foreign Affairs Research but with emphasis on arriving at recommendations on how countries in the region can Specialists Mary Fides A. Quintos (rightmost) conserve and protect the coral reefs. and Louie Dane C. Merced (leftmost).

The Study Group exchanged knowledge on national and regional practices for the protection of coral reefs, particularly with regard to reef restoration technologies and the work of the Coral Triangle Initiative (CTI). While both contribute positively to the protection of coral reefs, a number of challenges still have to be overcome, including the need for further studies for coral reef restoration technology to keep up with the impact of climate change to ocean temperature, and for the strengthened implementation by national governments of their respective national plans of action under the CTI.

Specific recommendations include the identification of sensitive habitats and resources with a view to proposing marine protected areas (MPAs) and networks of MPAs; the establishment of a regional network of marine scientists and sharing of scientific data; and the promotion of a community-based approach to marine environment protection through education and capacity-building. 16 PHILIPPINE RELATIONS • JAPAN

apanese Prime Minister Shinzo Abe visited the Philippines J from 12 to 13 January 2017, the first foreign leader to come to the country under Pres. Rodrigo Duterte. The Philippines was Abe’s first stop in his four-country tour that included Australia and Southeast Asian countries Indonesia and Vietnam.

Abe’s two-day visit comprised of activities in Manila and Duterte’s hometown of Davao. Abe and his delegation, which included Chief Cabinet Secretary Koichi Hagiuda and Special Advisor to the Prime Minister Katsuyuki Kawai, received Parsing Abe’s welcome honors upon their arrival on 12 January. During the Manila leg of his visit, Abe held a summit meeting with Duterte, met with Japanese and Filipino businessmen, and attended the Official Visit: state banquet hosted by Malacañang Palace in his honor. During the Davao leg of his visit, the Japanese premier met with local Change or government officials, businessmen, and Japanese descendants. Abe participated in other activities, a number of which enabled Continuity in the him to interact with the Filipino public. Besides engaging in official meetings during his Davao stay, the Japanese premier visited Duterte’s home and Mindanao Kokusai Daigaku Philippines-Japan (Mindanao International University), the latter an institution established and funded by Japanese descendants and residents Relations under in Davao. He concluded his trip by attending a Philippine eagle naming ceremony. Meanwhile, Abe’s wife, Akie, who counts the empowerment of women and disadvantaged groups in society as the Duterte one of her advocacies, visited the Philippine School for the Blind in Pasay. The first lady also visited Mintal Cemetery in Davao, Administration? where early Japanese settlers are buried. The visit illustrates the mix of official and personal approaches Valerie Anne Jill I. Valero to diplomacy. The cordial treatment extended to Abe may well be considered an encouraging sign in Philippines-Japan relations since it highlights Duterte’s own positive view of Japan and the country’s paramount position in the overall scheme of Philippine foreign relations. However, do the fruits of the visit and Duterte’s receptiveness to Japan mean change in the bilateral relations or continuity to an already realized partnership under the Duterte administration?

Getting Down to Business Abe’s official visit came at a critical time when the Duterte administration declared its intention to “separate” from the Philippines’ most significant ally, the US, and has begun to gravitate towards China and Russia. Like the Philippines, the US is Japan’s most significant ally, and the US-Japan alliance is considered as a cornerstone of the Asia-Pacific security architecture. China and Russia, meanwhile, are considered as longtime regional rivals to the US. Even more worrisome for Japan is that it remains at odds with the two countries over political-security issues.

It is perhaps for these reasons that Abe came to the Philippines with the promise of additional investments and development 17 PHILIPPINE RELATIONS • JAPAN

School children greet Philippine President Rodrigo Duterte (left) and Japanese Prime Minister Shinzo Abe (center). assistance and expanded cooperation, and the hope of gaining training, and of promoting other aspects of defense cooperation, Philippine support, specifically in addressing issues and as well as joining this year’s US-Philippines Balikatan Exercises. developments in East Asia. He also explicitly stated Japan’s desire for bilateral cooperation on the matter of North Korea, specifically soliciting Philippine At the summit meeting at Malacañang, Abe pledged JPY1 support to strictly enforce relevant UN Security Council trillion in aid covering both private investment and development resolutions. assistance over the course of five years, to be handled by the proposed Joint Committee on Economic Cooperation and Abe, recognizing the Philippines’ pivotal role as the current Infrastructure. He offered Japan’s technology and expertise ASEAN Chair, stated that Japan hopes to engage and cooperate in helping with the Philippines’ infrastructure development with the Philippines on regional issues concerning economy and efforts, particularly the Metro Manila transportation roadmap defense, such as the conclusion of the Regional Comprehensive review, national highway system plan, Manila subway project, Economic Partnership and peaceful resolution of the South and Clark Green City Concept, which includes a survey for the China Sea dispute. Malolos-Clark train route, and electric power field construction plan. A Personal Touch In contrast to the Manila leg, the Davao leg of Abe’s visit Abe mentioned Japan’s desire to continue assistance in Mindanao was more intimate in spite of still being comprised of official in health, education, urban and infrastructure development, activities. Aside from meetings, the itinerary for Duterte’s and electrification, among other areas. Notably, Abe also cited hometown included a visit to Duterte’s private residence, as well an interest in collaborative efforts to address the problem of as opportunities to interact with the public and experience local illegal drugs in the Philippines, having already invited relevant culture. Philippine senior officials to Japan and declaring intentions to help in the development of treatment facilities, programs, Abe and first lady Akie spent the morning of his Davao stay at promotional initiatives, and human resources. Duterte’s home, with Abe being given a house tour by Duterte himself. Abe also stepped out into the neighborhood, much On political-security affairs, Abe expressed Japan’s intention of to the delight of the residents who were able to meet him and further extending assistance to the Philippines in strengthening security concerns notwithstanding. At the Philippine eagle its maritime capabilities by continuing to provide equipment and naming ceremony, the Japanese premier and his wife sampled 18 PHILIPPINE RELATIONS • JAPAN

directly for its approach towards China, despite, for instance, While some aspects of harboring grave concerns on Chinese activities in the South China Sea. Philippines-Japan relations In Duterte’s case specifically, his perception of Japan has may undergo changes, the been shaped by positive Japanese presence in Mindanao, with the region being the largest recipient of Japanese official relations’ foundations will development assistance in the Philippines. Japan implements socio-civic programs such as the Japan-Bangsamoro Initiatives remain the same. Change for Reconstruction and Development (J-BIRD). In addition, it assists in Mindanao peace building efforts, and was part of the and continuity are inherent, International Monitoring Team (IMT). Personal experience, then, has enabled Duterte to view Japan with openness indispensable elements to any and geniality. Also, by opening his home to Abe, Duterte demonstrated a contrasting, personal approach to diplomacy – fruitful bilateral relationship. one that, incidentally, Abe has been known to practice.

However, certain concerns still persist and had not been touched on during the visit, which go beyond the ubiquitous question the durian, a trademark fruit of Davao. Interestingly, durian of alliances and regional counterbalancing, such as the issue of also happens to be one of the most expensive fruits imported comfort women, proper implementation and genuine usefulness from Southeast Asia in Japan. of development assistance projects, and issues of trade and labor. Only time will tell if these will once again be brought to the Abe’s visit to Davao was a landmark event not only because it forefront of Philippines-Japan relations. is a visit to Duterte’s hometown, but also because Davao has a large Filipino-Japanese community. As a result of the growth Philippines-Japan Relations under Duterte: Change or of Japanese settlement in the 20th century, Davao earned the Continuity? moniker “Little Japan.” Barangay Mintal, where the Japanese Given the transitions in leadership and shifts in regional and cemetery is located, is also known as “Little Tokyo.” Japanese global political-security environment, there is an immediate descendants and a number of Japanese expats call Davao home, inclination to assume that the dynamics of bilateral relationships illustrating a unique link between the Philippines and Japan. will dramatically, if not subsequently, change. Some key aspects of Philippine foreign policy and relations have begun Parsing the Visit to undergo recalibrations under the Duterte administration. The current regional and global environment, in the context of More critically, the President’s declaration of separation from changes in leadership and foreign policy, puts Abe’s proactive the US and gravitation towards China, even Russia, create a diplomacy to the test. The tour of Southeast Asia and Australia seemingly complicated milieu for the conduct of Philippines- is critical because Japan needs to counter developments that Japan relations. could potentially disrupt, if not compromise, the regional security environment. On the one hand, it needs to secure its There is reason to believe that despite growing complications, relationships with countries whose leadership may be inclined Philippines-Japan relations can and will develop along a positive to gravitate towards China by reaching out and demonstrating trajectory. Abe’s visit was symbolic as it was practical; Duterte’s its openness and viability. On the other hand, it needs to reception personal as it was official. If there is any key takeaway demonstrate to like-minded partners that it upholds its alliance from the visit, it is the burgeoning prospect of diversification in obligations and is willing to take on greater responsibility in the cooperation between the Philippines and Japan, as exemplified midst of upheavals. by Japanese aid commitment in relation to Duterte’s anti-drug campaign. Likewise, the tour impresses the significance of Japan as a regional actor and bilateral partner. Duterte’s reception of Abe, While some aspects of Philippines-Japan relations may undergo along with past cordial exchanges between the two leaders, changes, the relations’ foundations will remain the same. indicates that the current administration views Japan favorably Change and continuity are inherent, indispensable elements to despite it being the staunchest US ally in East Asia. For its part, any fruitful bilateral relationship. It is the ubiquity of change Japan has never attempted to penalize or criticize Duterte for and continuity that has enabled and will enable Philippines- the growing complaints on human rights violations as a result Japan relations to prosper under the Duterte administration and of his anti-drug campaign; neither has it called Duterte to task under future administrations. 19 LOOKInG AHeAD • eCOnOmy

Philippine economic outlook

rowell G. casaclanG & jovito jose p. KatiGbaK

mid rising global uncertainties in 2016, the Philippine On the supply side, real estate activity and manufacturing A economy managed to grow by 6.8 percent. It was one were the primary sources of growth. Manufacturing expanded of the fastest growths worldwide, along with other emerging 7.0 percent in 2016, a growth attributed to increase in economies India, China, and Vietnam. Some experts believe production of petroleum products, food manufactures, and that the Philippine economy will continue to accelerate this transport equipment, according to the National Economic year, an expected outcome due to increase in public spending and Development Authority (NEDA). The property industry and robust domestic consumption. continues to grow due to new captive markets as a result of improved accessibility and new infrastructure projects that economic Performance in 2016 connect Metro Manila with major urban growth areas to its The Philippines posted a 6.8 percent GDP growth in 2016, north and south. The business process outsourcing industry and which is within the government’s 6.0–7.0 percent growth rate overseas remittances were also seen as drivers of the growth of target. This growth is the country’s fastest since 2013 (see figure the real estate industry. 1), and it is also identified as one of the highest growth rates in Asia. The Philippines joined other high-growth economies Agriculture’s contribution to GDP continues to shrink (see such as India, China, and Vietnam, which grew 7.9 percent, figure 2). The sector’s decline in 2016 was due to weather 6.7 percent, and 6.2 percent, respectively. Moreover, the disturbances such as typhoons and El Niño-induced dry spells. Philippines’ average GDP growth rate from 2010–2016 is 6.3 For instance, damage to agriculture in the 29 provinces hit by percent, the strongest recorded since 1978. typhoons Karen and Lawin reached PhP10.21 billion. The rice sector was severely affected, incurring about 98 percent of The high growth was driven primarily by investments the total cost of damages. Data from the Philippine Statistics and consumer spending on the demand side and services, Authority indicated that employment in agriculture, the second particularly real estate activity, on the supply side. Investments, largest sector, accounted for 26.9 percent, while 17.5 percent which account for 27.1 percent of total expenditure, increased of workers were in the industry sector. Of the 40.8 million to 20.8 percent, the highest growth rate since 2013. Meanwhile, the largest component of the demand side was combined 10 private and government spending, which surged to 7.1 percent. 9 Government spending for infrastructure grew significantly 8 during the Aquino administration, from PhP165 billion in 2010 7.6 7.1 7 6.8 to PhP760 billion in 2016. The infrastructure program for 2016 6.6 6.7 6.2 5.9 contributed 5.0 percent of the country’s GDP. Another cause of 6 the surge was the enormous election-related spending during 5 the first half of the year. 4.2 4 3.7

The Bangko Sentral ng Pilipinas (BSP) cited trade in services as 3 a major driver of the country’s growth. One of its sectors, travel 2 DUTERTE and tourism, reportedly added PhP2.85 trillion to the local 1.1 1

economy, or almost 20 percent of GDP. Meanwhile, balance RODRIGO GLORIA ARROYO BENIGNO AQUINO III 0 of trade remained to be import-heavy despite the expansion of 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 exports in the past three years. Ultimately, the robust domestic Statistics Authority. Philippine Source: demand offset the effect of negative net exports. figure 1. gross domestic product growth rate, 2007–2016. 20 LOOKING AHEAD • ECONOMY

employed persons in 2016, 55.6 percent were in the services sector. 60 55 Services The BSP identified remittance inflows as a major driver of 50 domestic consumption, which resulted in higher economic 45 growth. Total remittances in 2016 reached USD26.9 billion, 40 5.0 percent higher than the USD25.61 billion recorded in 2015. 35 30 This is contrary to World Bank’s forecast that the Philippines Industry would post its slowest remittance expansion in 10 years owing 25 to the decline in OFW deployments. 20 15

10 Macroeconomic Fundamentals Agriculture 5 Remain Stable 0 The Philippines’ recent growth story is said to have been buoyed 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 by a strong and stable macroeconomic environment owing to Statistics Authority. Philippine Source: effective policy instruments of the national government and the Figure 2. Share in GDP by basic sector, 1998–2016, BSP since 2010. Macroeconomic stability has been achieved and in percent. preserved as inflation and interest rates remain low and stable, and fiscal deficit is still within manageable levels. market and its impact on prices of basic commodities. Below- For one, the national government has been using expansionary target annual inflation rate of 1.4 percent was also recorded in fiscal policy options to intensify spending in infrastructure. 2015. While the Aquino administration exercised austerity, having successfully reduced fiscal deficits from 3.5 percent of GDP in The BSP kept interest rates steady since it lowered overnight 2010 to below 1.0 percent in 2015, the Duterte administration, borrowing rate to 3 percent and overnight lending rate to 3.5 in contrast, is seeking to widen the debt-to-GDP ratio starting percent in the midst of shifting to the Interest Rate Corridor with its 2.7 percent target in the second half of 2016. System.1 This decision was made amid a manageable inflation rate and firm domestic demand conditions. Meanwhile, growth The Bureau of Customs (BoC) and the Bureau of Internal in broad money accelerated to 12.4 percent year-on-year in Revenue (BIR) reported higher revenue collection last year, December 2016 from 9.4 percent in the previous year. which was facilitated by improved tax administration. The BoC generated PhP398.41 billion, an increase of 8.5 percent, or Unemployment rate was down to 5.5 percent in 2016 compared PhP31.35 billion, from 2015’s PhP367.06 billion. On the other to 6.3 percent posted in 2015. Underemployment rate, however, hand, BIR collected PhP1.58 trillion. It was an improvement has not improved as it only slightly decelerated to 18.3 percent. of 9.31 percent, or about PhP134 billion, from the previous Improving the quality of growth and creating more jobs are year’s PhP1.44 trillion. The BIR, however, still fell short of argued to help reduce underemployment rate. About 43.2 its PhP1.62 trillion target. BIR Commissioner Caesar Dulay million, or 63.4 percent of the 68.1 million population under the attributed the shortfall to lack of manpower. Before the 15 years old and over age group, are part of the labor force. This transition, former commissioner Kim Henares tried to boost is slightly lower than the 63.7 percent labor force participation tax collection efforts through projects such as deterring tax rate in 2015. Nevertheless, the total factor productivity during evaders and suspending businesses that fail to comply with the fourth quarter has been the fastest in ASEAN, growing at their VAT obligations. Revenue effort, or the ratio of revenue 2.3 percent. collected to what the government expects to generate, slightly decelerated to 15.2 percent after it had improved throughout the Economic Prospects Aquino administration. On the contrary, tax effort, or the ratio The Philippine economy is projected to expand to 6.8 percent of actual tax collection to predicted tax revenue, improved to in 2017 due to a fiscal stimulus rolled out by the national 13.7 percent, the highest since 2006. government to lift the budget deficit to 3 percent of GDP, according to the International Monetary Fund (IMF). The Inflation rate throughout 2016 had been benign. The full- Asian Development Bank (ADB) forecasts slower growth for the year inflation rate is 1.8 percent, which was just below the economy at 6.4 percent buoyed by robust domestic consumption government’s inflation target of 2.0–4.0 percent. Former BSP and public and private investment. The World Bank appears Governor Amando M. Tetangco Jr. attributed the low full-year to be the most optimistic among the financial institutions as inflation mainly to the drop in oil prices in the international it estimates the Philippine economy to grow to 6.9 percent in 21 LOOKING AHEAD • ECONOMY

2017 and 7.0 percent in 2018 supported by public investment of USD2.4 trillion in 2015 is the third largest in Asia and the projects and expansion of services exports. sixth largest in the world. In 2015, it received USD121 billion in FDI fueled by intra-ASEAN sources (18 percent of total) and The forecasts for the Philippine economy are more promising with 62.1 percent going to the services sector. ASEAN’s growth compared to developing Asia’s projected growth of 5.7 percent is assumed at 4.5 percent in 2016 and will rise marginally to for 2017.2 The global economy is estimated to grow at 3.4 4.6 percent in 2017.9 The region is also aggressively pushing percent in 2017 and 3.6 percent in 2018, which is underpinned for the conclusion of the Regional Comprehensive Economic by freer activity of commodity exporters and sturdy domestic Partnership (RCEP) in 2017. demand in commodity importers. However, policy uncertainty in major economies as well as weak investment and sluggish Risks productivity growth across a number of emerging markets and A major downside risk is the elevated policy uncertainty across developing economies (EMDEs) dampen the outlook.3 advanced economies, especially with the election of Donald Trump as US President and Great Britain’s decision to leave Global Trends and Regional Developments the European Union. These events led to a more pronounced The volume of world trade in goods and services remained at a uncertainty about future fiscal, trade, immigration, and foreign low level in 2016, growing only by 1.2 percent, which was the policy directions as well as increasing tendencies towards third-lowest pace over the last three decades. Cyclical factors protectionist and populist stances. As such, global growth and behind the slowdown include weak demand and waning interest the impetus for trade liberalization are slowing down with for deeper trade liberalization.4 On the other hand, structural investors and households becoming more cautious. shifts boosting global trade growth in the 1990s and 2000s have already started to mature.5 World trade growth is expected Another risk pertains to the global financial market volatility to stabilize at 2.7 percent in 2017 and gradually expand to 3.3 which stems from the divergence of monetary policies in percent in 2018.6 advanced economies and the downgrading of credit quality in EMDEs. Europe and Japan have implemented negative rates to Investment continues to be subdued given that its contribution raise inflation levels and stimulate economic growth. The US to global growth declined to an average of 0.7 percent since is expected to pursue its policy tightening by raising interest 2012, half of the 1.4 percent in the 2003–2007 period. The rates three times in 2017, the first of which was done in March. weakening of investment can be attributed to the sluggish global Higher policy rates in the US may lead to intensified capital demand, sliding commodity and oil prices, heightened financial outflows from EMDEs and appreciation of the US dollar, which market instability, policy uncertainties, and social instability in increases debt servicing costs and credit risks for EDMEs.10 several countries.7 The Philippines enjoyed strong net inflows The BSP stated that the country’s monetary policy position has of foreign direct investment (FDI) after it received a total of already taken into consideration the anticipated US rate hike in USD7.93 billion in 2016, almost 41 percent more than the March. USD5.63 billion figure in 2015 and overtaking the USD6.7 billion projection made by the BSP. FDI inflows will continue to Geopolitical tensions and domestic conflicts as well as increase in 2017 given the country’s young population, dynamic terrorism may also weigh down global growth by causing industry sectors, and stable macroeconomic fundamentals, market disruptions and discouraging confidence on the global according to Tetangco. economy.11

Crude oil prices have slightly recovered by averaging USD43 An upside risk derives from the expected fiscal stimulus in a per barrel (/bbl) in 2016 due to lower supply from non-OPEC number of advanced economies. The administration of US members and OPEC’s decision to set a production cap of 32.5 President Donald Trump has already proposed the reduction in million barrels per day for the first half of 2017. Oil prices corporate and personal income tax rates and a USD1 trillion are estimated to average USD55/bbl in 2017. Metal prices infrastructure investment plan, which both aim to stimulate and agricultural prices are likewise forecasted to strengthen economic activity. Fiscal stimulus measures in the EU, Japan, marginally in 2017 as markets gradually tighten and energy prices and China have the potential to raise growth and increase global increase.8 The Philippines stands to benefit from weakening oil demand which can benefit EMDE exporting countries.12 and commodity prices since it is both a net oil and commodity- importing country. Implications for the Philippines While global growth remains subdued, the Philippine economy At the regional level, ASEAN has consistently performed well is currently in a favorable position to continuously expand given after it recorded an average annual growth rate of 5.3 percent its solid macroeconomic fundamentals, vibrant industries, over the 2007–2015 period. ASEAN’s combined GDP worth accelerated public spending, and young work force. 22 LOOKING AHEAD • ECONOMY

While global growth remains subdued, the Philippine economy is currently in a favorable position to continuously expand given its solid macroeconomic fundamentals, vibrant industries, accelerated public spending, and young work force.

The services sector is a resilient driver of world economic considered as the country’s first smart, green, and disaster- growth. Thus, the Philippine economy is poised to gain from resilient city. Malaysia recently expressed its interest to positive developments in this sector. Specifically, the Philippine participate in the construction of Clark Green City given its Information Technology and Business Process Management experience in Putrajaya. (IT-BMP) sector generated 1.15 million jobs for Filipinos and produced another 3.68 million indirect and induced jobs in 2016. Rising protectionist tendencies coupled with global uncertainties It garnered USD22.6 billion in revenues in 2016, and targets to may adversely impact the country’s economic prospects. To hit the USD40 billion-mark annually by 2022. Reaching that sustain growth, policymakers have to consider these global goal entails nurturing IT-related skills and promoting human developments in pursuing stronger economic relations with capital development to produce highly-skilled workers and move traditional partners and exploring opportunities in non- up toward high-value added services. traditional markets and under-represented sectors.

In terms of manufacturing, the government has developed its 1 BSP shifted to the Interest Rate Corridor system in order to ensure that money Manufacturing Resurgence Program (MRP) to capitalize on market interest rates would only move within a reasonably close rate around BSP’s the current migration of some foreign and local businesses from policy rate. China to low-cost locations in the Southeast Asian region.13 2 Developing Asia refers to the 45 members of the ADB coming from Central Asia, However, foreign businesses have consistently urged the East Asia, South Asia, Southeast Asia, and the Pacific. 3 World Bank Group, Global Economic Prospects: Weak Investment in Uncertain Times, Philippine government to actualize its promise of amending the January 2017, Washington, DC: World Bank. © World Bank. https://openknowledge. economic provisions of the 1987 Constitution to allow freer worldbank.org/handle/10986/25823. entry and operations of foreign firms in the country. 4 United Nations, World Economic Situation and Prospects 2017, New York: United Nations, https://www.un.org/development/desa/dpad/wp-content/uploads/ sites/45/publication/2017wesp_full_en.pdf. Aside from enhancing its soft infrastructure, the Philippines 5 is also aggressively developing its hard infrastructure as the These include Information and Communications Technology (ICT) advancements that lowered transport costs, China’s integration into global trade networks, further Duterte administration seeks to allot at least 5 percent of GDP integration in Europe, and the maturity of global value chains (GVCs). until 2022 for infrastructure projects, urging observers to dub 6 United Nations, World Economic Situation and Prospects 2017. this plan as the “golden age of infrastructure”. More recently, 7 United Nations, World Economic Situation and Prospects 2017. the Philippine government secured USD24 billion worth of 8 World Bank Group, Global Economic Prospects, January 2017. 9 investment and financing agreements from China, with USD15 “ASEAN in 2016,” ASEAN, accessed March 17, 2017, http://asean.org/ storage/2012/05/ASEAN_in_2016.pdf. billion apportioned for investment projects and the remaining 10 World Bank Group, Global Economic Prospects, January 2017. 14 USD9 billion for financing facilities. Improving the country’s 11 International Monetary Fund, World Economic Outlook Update January 2017, infrastructure would raise the economy’s global competitiveness Washington, D.C.: IMF, https://www.imf.org/external/pubs/ft/weo/2017/ and attractiveness as it ranks last among ASEAN-5 nations in update/01/pdf/0117.pdf. 12 terms of overall infrastructure quality.15 World Bank Group, Global Economic Prospects, January 2017. 13 Vietnam, Myanmar, Cambodia, and Indonesia have been recipients of outgoing Chinese, South Korean, Japanese and Taiwanese enterprises due to their lower wages Foreign investments into the Philippines are likewise being and young workforce. India also benefitted from this trend as Taiwanese manufacturing channeled toward projects concerning the environment and group Foxconn plans to build 12 new factories and employ one million workers by climate change. Solar Philippines announced its decision to 2020 amid increasing wages and labor disputes in China. Intel and Microsoft already invest USD150 million for the creation of a new solar power relocated some of their factories from China to Vietnam. 14 Alexis Romero and Richmond Mercurio, “Philippines, China sign $24-B deals,” plant in Tarlac City. Furthermore, the Bases Conversion and The Philippine Star, October 22, 2016, accessed March 17, 2017, http://www.philstar. Development Authority (BCDA) has been attracting local and com/headlines/2016/10/22/1636102/philippines-china-sign-24-b-deals. foreign investments for its Clark Green City project, which is 15 Indonesia, Malaysia, Philippines, Singapore, and Thailand comprise ASEAN-5. ministry of new and renewable energy, India

ASEAN-India Renewable Energy Cooperation: Opportunities and Challenges for the Region and the Philippines

Jemimah Joanne C. Villaruel

SEAN countries have, for some time, embarked on energy security by embarking on partnerships and collaborative efforts, A cooperation, both internally and externally, realizing that both on bilateral and multilateral platforms, as well as exploring overdependence on external energy sources will have negative renewable sources of energy to complement its vastly growing implications to a state’s own energy security. As such, ASEAN energy needs. has pursued policy responses to address the region’s energy supply and security, one of which is the promotion of renewable ASEAN-India relations reached a level of strategic partnership energy sources such as hydro, solar, wind, and biofuels from in 2012 given that both parties have shared numerous convergent palm oil, sugar cane, and coconut. interests encompassing their political, economic, and security objectives. ASEAN and India are also dealing with energy Prime Minister Narendra Modi, who has been very vocal about concerns, which can be an area for further cooperation. It has his goal to claim India’s place in the world stage, understands been noted that despite the Act East policy under Prime Minister the great significance of energy in fulfilling India’s development Modi, India’s renewable energy cooperation with ASEAN has goals. India has also made a mark in developing its energy been lackluster. 24 in focus • India

This work argues that while renewable energy cooperation and panels.5 In addition to funding and policy initiatives, the presents an opportunity to deepen ASEAN-India relations, an Ministry of New and Renewable Energy (MNRE) has also set up enabling environment is necessary to sustain cooperation in the a Solar Energy Centre near Delhi with the state-of-art facilities medium to long term. This study also identifies the steps that used to test solar thermal and solar photovoltaic materials, can be done to foster energy security cooperation and examine devices, and systems in addition to its applied research and the implications to the Philippines’ own energy security plan. training on solar power development.

India’s Energy Security Policy Wind power dominates the renewable energy industry of India is the fourth largest energy consumer in the world behind India, representing 70 percent of its total renewable energy China, US, and Russia, importing 80 percent of its crude oil capacity. This can be attributed to the considerable support and 25 percent of its natural gas requirements.1 According to from government by providing significant tax incentives that the Indian Planning Commission, approximately 600 million have induced substantial investments in wind energy projects. Indians still have limited or no access to electricity and around The provision of preferential tariffs has also accelerated the 700 million Indians use biomass as their primary source of development of the industry. As stated in “Unleashing the energy for cooking.2 In this regard, Indian policy makers Potential of Renewable Energy in India” by the World Bank, consider energy security as one of their foremost priorities given MNRE has also given ample support to the wind power industry that the majority of its population lacks access to electricity. by establishing the Center for Wind Energy Technology as the focal point for research and development on wind energy, Renewable energy, in particular, is one of the focus of Prime and investing in the Wind Resource Assessment Program. Minister Modi in addressing India’s energy needs. At the According to the Global Wind Report 2015, India stands as the inauguration of the first Renewable Energy Investors Meet (RE- second largest wind market in Asia, and fifth largest in terms of Invest) in 2015, Prime Minister Modi spoke of the “seven horses total wind power capacity. of energy”, which include thermal, gas, hydro, and nuclear power, with emphasis given on the development of solar, wind, Biomass energy, utilized from organic matter to produce heat and biogas.3 In 2015, India was among the top ten investing and electricity, also remains a vital source of energy for India. countries in renewable energy with an increase of 22 percent Approximately 32 percent of the total primary energy use in amounting to USD 10.2 billion, according to the United Nations India is still derived from biomass, and more than 70 percent of Environment Programme (UNEP). the country’s population depends upon it for their energy needs. Biomass energy, according to MNRE, is widely used because it The Indian government has sought to develop renewable energy is renewable, widely available, and carbon-neutral. sources to aid its massive energy needs, while also mitigating the effects of climate change. India has made significant Despite these advancements, India is still dealing with factors strides in solar and wind energy sources. It was one of the first that hinder renewable energy development. Even with Prime countries to use hydroelectric power plants by constructing Minister Modi’s tremendous support for its development, the the Darjeeling and Shimsha (Shivanasamudra) power plants in complete shift to the use of renewable energy will still take 1898 and 1902, respectively.4 In a highly-populated country time. Factors such as regional concentration of renewable energy like India, hydropower is preferred since it has the capacity to potential, regulatory issues, financial barriers, and limited urban start and shut down quickly and the flexibility to respond to and industrial applications for renewal energy, constrain the full electrical fluctuations even in different seasons and various times and efficient utilization of renewable energy in the country. of the day. In addition, the World Bank’s “India Hydropower For regional concentration of renewable energy potential, the Development” document stated that hydro-resources are largely challenge lies in the uneven distribution and location-specific available in some of the least-developed parts of the country; nature of renewables. This makes it difficult to scale up grid- thus, hydropower can contribute to regional development and connected renewable power. Financial barriers, meanwhile, are poverty alleviation if designed appropriately. brought about by the need for large capital investment (compared to conventional sources) and the difficulty of obtaining low-cost For solar energy, India stands as a low-cost destination for technology and long-term funding due to project risks perceived grid-connected solar power. According to the World Bank’s by financiers. “Transforming India’s Future with Solar Power” document, it is projected that further development of solar power in India will ASEAN Initiatives on Renewable Energy help reduce emissions per unit of GDP by 20 to 25 percent in In 2011, the Asian Development Bank (ADB) dubbed the 21st 2020 and produce clean energy for the country. In his previous century as the Asian century with Asia’s GDP expected to capacity as Chief Minister of Gujarat, Prime Minister Modi had quadruple from 2010 to 2035 and generate half of global GDP supported the construction of a 900-megawatt (MW) solar by 2050. This growth has lifted millions out of poverty in Asia plant. Furthermore, Prime Minister Modi is also establishing and elevated the quality of life in the region. However, one policies that give incentives to domestic-made solar components urgent concern on this remarkable growth is securing energy 25 in focus • India

to sustain Asia’s economic expansion. Half of Asia’s population ASEAN and India also recognized the mechanisms that must be live without access to electricity and majority of the population put in place for renewable energy cooperation to succeed. relies on traditional fuels such as wood, charcoal, and animal manure. These traditional fuels provide low-quality energy and Since the ministerial meeting took place only five years ago, it destroy natural ecosystems. would be premature to expect its immediate impact on ASEAN- India cooperative efforts given the difficulty of navigating In terms of energy consumption, the ASEAN region is projected structural and systemic intricacies in each ASEAN Member to double its energy usage between 2010 and 2035. Fossil fuels State. Thus, it is important for the two parties to address the will remain the dominant source of energy, with oil consumption challenges associated with renewable energy cooperation. projected to double; while the use of natural gas expected to triple. Coal consumption is also projected to rise to over 80 First, while ASEAN as an organization has the mechanism for a percent during the same period.6 Studies indicate that continued unified energy policy through the APAEC, implementation of reliance on fossil fuels to meet energy demands will have serious these energy policies in each ASEAN Member State is another environmental consequences, affecting air and water quality, matter altogether. ASEAN Member States have varying levels water availability, land use, and even the global climate. Hence, of political and economic development, making the process of there is a crucial need to ensure that energy sources will not harmonizing energy policies and projects a daunting task. only be affordable but also environmentally sustainable in the long run. To illustrate this, individual countries have different starting points in their natural conditions and potentials, whether they One of the ways in which ASEAN Member States may avert are endowed with solar, wind, biomass, or geothermal resources, irreversible damage to the environmental is through openness as well as differing political and regulatory frameworks for to diversify sources of energy mix. Given the abundance of renewable energy.7 Countries like Indonesia, Malaysia, the renewable energy sources in ASEAN, renewable energy is Philippines, Thailand, and Vietnam have introduced medium perceived as a viable option with many ASEAN countries already to long term renewable targets; however, these targets differ establishing renewable energy policies and targets. These steps greatly in quantitative objectives, time, and specificity due are in line with the ASEAN Economic Community Blueprint in part to their varying levels of economic development. 2015 that emphasizes the need to strengthen renewable For example, Thailand and Malaysia have the same level of energy development and promote open trade, facilitation, and renewable electricity potential, but Thailand has introduced cooperation in the renewable energy sector in a bid to mitigate more ambitious targets even though its GDP per capita level is greenhouse gas emissions and abate global climate change. only half of Malaysia’s GDP per capita.8

Recognizing the urgency of the ASEAN region’s energy Second, the use of renewable energy in ASEAN has also predicament, the ASEAN Plan of Action for Energy Cooperation been intermittent due to constraining factors such as lack of 2010–2015 (APAEC) was prepared to serve as a blueprint infrastructure and other technical barriers such as grid access. on ASEAN cooperation on energy. The APAEC is under the Certain parts of the region have more renewable energy ASEAN Vision 2020 adopted in 1997 by ASEAN leaders as resources, but load centers are usually in different areas, making means of creating a stable, prosperous, and highly competitive it difficult to interconnect energy grids for more efficient ASEAN economic region. delivery of energy.9

ASEAN-India Renewable Energy Cooperation: Third, renewable energy development in ASEAN is hampered Issues and Prospects by the lack of financing and investments for renewable energy, As current global conditions demonstrate, few countries have limited experience and technology in renewable energy design, the capacity to confront the gamut of traditional and non- and lack of appropriate mechanisms to support renewable energy traditional challenges – including energy scarcity – unilaterally. projects.10 Renewable energy policy is notoriously difficult to Developing countries, especially, will benefit the most from a implement given its differing mechanism from conventional multilateral approach in addressing such challenges. energy sources. It is also capital intensive and suffers from insufficient financial incentives that limit investments.11 During the first meeting on ASEAN-India renewable energy cooperation in 2012, both parties signified their interest to ASEAN must therefore endeavor to tackle these barriers and explore ways to complement their respective renewable energy promote renewable energy development through sharing of policies to mutually address their energy needs. At the same expertise among ASEAN Member States. Due to the unique time, the meeting also brought to light constraints that India and physical, socioeconomic, and energy landscape of each ASEAN ASEAN will face in fully collaborating on renewable energy. Member State, the robustness and effectivity of renewable During the workshop that took place just before the Meeting, energy development will also vary.12 For its part, India must 26 in focus • India

The Philippines can explore further cooperation with India by encouraging more investors and private energy companies to examine possible renewable energy collaboration given ripe market conditions and growing energy demand. keep in mind the divergent renewable energy policies of ASEAN Enhanced Cooperation in the Field of Renewable Energy in 2007. Member States when formulating collaborative projects. The memorandum of agreement provides for collaboration in research, design, development, and demonstration of renewable While energy cooperation between ASEAN and India is still in energy technologies through activities such as technical experts its nascent stage, it presents an opportunity to explore ASEAN’s exchange program, sponsorship, training, conferences, and vast potential on renewal energy. It also highlights India’s other activities.13 The enactment of the Renewable Energy Law possible contribution to the region’s energy development. (Republic Act 9513) in 2008 increased the renewable energy projects in the country from 22 in 2008 to 406 projects in 2016, One of the ways by which regional cooperation can strengthen and has created three million jobs throughout the country, national policies on energy security is through information and according to Sen. Juan Miguel Zubiri who authored the said knowledge sharing to be able to create sound policies. ASEAN law. The National Renewable Energy Program (NREP) was also Member States stand to benefit from India’s expertise on wind established on 14 June 2011 to assist in the full implementation and solar energy. In this case, ASEAN and India should establish of the renewable energy law and strengthen the energy plan of a coordinating mechanism through which energy experts from the country. The Department of Energy (DoE) also established ASEAN and India will be able to share knowledge and expertise policy mechanisms, such as Renewable Portfolio Standards necessary in formulating sound, feasible, and practical policies (RPS), Feed-in Tariff (FiT)14, Green Energy Option Program, on energy collaboration. and Net-Metering for Renewable Energy, in order to support and increase investment and development of renewable energy.15 It would also be beneficial to conduct a comprehensive study on The Investment Priority Plan (IPP) includes renewable energy ASEAN-India energy commonalities based on the outcome of as a priority investment sector, and the Board of Investment the workshop, which may be jointly undertaken by the ASEAN (BoI) has approved 144 renewable energy projects worth Center on Energy (ACE) and MNRE of India, to examine the approximately PHP 17 billion from 2010 to 2015.16 challenges and issues of implementing cooperative mechanisms. The Philippine Energy Plan 2012–2030 aims to triple the The real test of ASEAN-India renewable energy cooperation country’s renewable energy capacity by 2030. Wind and solar will be its contribution to fulfilling the energy needs of local energy are currently the least utilized renewable energy sources communities in a sustainable and efficient way. The documents in the country. The National Renewable Energy Board (NREB) and pledges for energy collaboration should not be an end in stated that private sector interest in renewable energy is on the itself. The ministerial meeting and workshop on ASEAN-India rise prompting the government to endorse more solar and wind renewable energy cooperation in 2012 illustrated the urgency projects. of the issue and the common interest to address it, but initial efforts must translate to actions. It is crucial, now more than For solar power development, the NREB proposed the FiT ever, to demonstrate the willingness and determination of both rate of PHP 7.66 per kWh for another round of 500 MW ASEAN and India to develop this collaborative venture given the installation target for solar energy, subject to the approval of concrete gains it can offer to the people and the environment. the DoE and Energy Regulatory Commission (ERC) under the Duterte administration. As a sign of the Philippines’ growth in Opportunities for Philippines-India Cooperation solar power, the 132.5 MW solar farm in Cadiz City, Negros on Renewable Energy Occidental was inaugurated in March 2016, the largest in the Since cooperation on renewable energy between ASEAN and country and in Southeast Asia. India has its own set of challenges, many ASEAN Member States have taken a bilateral approach in shoring up their renewable Meanwhile, the exploration and development of wind power energy needs by embarking on agreements and joint projects. in the country has also yielded positive results. The Philippines is now the largest and fastest-growing producer of electricity Realizing the benefits of such arrangements, the Philippines from wind energy among ASEAN nations. According to a study has entered into a Memorandum of Agreement with India on by the US National Energy Laboratory, the Philippines has an 27 in focus • India

estimated 10,000 square-kilometer land area with good to As the Philippines puts in more effort into developing renewable excellent wind resources, and the country’s extensive coastline sources of energy, it can explore further cooperation with India and elevation also contribute to a rich wind energy potential. by encouraging more investors and private energy companies to examine possible renewable energy collaboration given ripe Despite these advancements, the contributions of wind and solar market conditions and growing energy demand. With India power to the total energy mix of the country remain minimal. willing to train and share expertise on wind and solar energy, it In a presentation by Mario Marasigan at the Asian Clean Energy is a prime opportunity for the Philippines to work with India on Forum 2016, it was shown that of the 25.64 percent share of further developing wind and solar capacities to achieve energy renewable energy in the total generation mix of the country, security. wind energy accounted for only 0.20 percent while solar energy accounted for 0.02 percent for 2014.

Mr. Sanjayan Velautham, Executive Director of the ASEAN Centre for Energy, stated that while the Philippines has vast 1 US Debt Clock. http://www.usdebtclock.org/energy.html Accessed on 15 February potential for clean energy, much of the renewable sources are 2015 2 still largely untapped. He also observed that since solar and Tough choices ahead for India’s energy security. http://www.livemint.com/ wind power are relatively new in the country, it will take time Industry/l5wOJA3LbNvIx9LvReZ5zI/Tough-choices-ahead-for-Indias-energy- security.html Accessed on 18 February 2015 before these sources can be fully harnessed. 3 Prime Minister Narendra Modi pushes for renewable energy for all. NDTV. http:// www.ndtv.com/india-news/prime-minister-narendra-modi-pushes-for-affordable- Dr. Yongping Zhai, technical advisor for energy at the ADB, renewable-energy-for-all-739783 Accessed on 13 May 2016. observed that the billions of investments on renewable energy 4 Hydropower Plant. http://indianpowersector.com/home/power-station/hydro- in the country are still too small since majority of funds still go power-plant/ Accessed on 26 February 2015. 5 Modi’s Renewable Energy Revolution for India. http://www.sustainablebusiness. to fossil fuels. He also believes that the country is a good place com/index.cfm/go/news.feature/id/1925 Accessed on 10 March 2015. for renewable energy investment due to its growing economy. 6 ASEAN’s Energy Security Challenges. http://www.sciencespo.fr/ceri/fr/content/ However, he lamented that the Philippines implements many dossiersduceri/asean-s-energy-security-challenges. Accessed on 23 March 2015 restrictions to foreign investors, making it difficult for them to 7 Renewable Energy in Southeast Asia (ASEAN-RESP). https://www.giz.de/en/ enter the market. worldwide/16395.html Accessed on 15 September 2016. 8 Samantha Olz and Milou Beerepoot. Deploying Renewables in Southeast Asia. International Energy Agency. https://www.iea.org/Textbase/npsum/renew_ The same sentiments were echoed in the Philippine Energy seasiasum.pdf Plan, indicating that at least PHP 3 trillion in fresh investments 9 Dr. Sanjayan Velautham. Energy Outlook and Challenges of ASEAN. http://www. are needed for the country to attain energy security.17 Sen. canon-igs.org/research_papers/160527_velautham_summary.pdf Accessed on 05 Sherwin Gatchalian, Chair of the Senate Committee on Energy, November 2016. 10 also called for more competition among foreign and domestic Status of Renewable Energy in ASEAN. http://www.globalmobiletech.com/en/ html/Files/091118_ASEAN_policies.pdf Accessed on 22 July 2015 players to lower power costs in the country. 11 ASEAN should flick the switch to renewable. http://www.eastasiaforum. org/2014/12/27/asean-should-flick-the-switch-to-renewables/ Accessed to 23 The Philippine Energy Plan also cites several development March 2015. challenges on solar and wind energy. For wind power, major 12 Murray Hiebert, David L. Pumphrey, Gregory B. Poling, Molly A. Walton. concerns include the high cost of development and lack of Sustainable Energy Futures in Southeast Asia. CSIS. https://csis-prod.s3.amazonaws. updated data. There is also a need to enhance local technical com/s3fs public/legacy_files/files/publication/121227_Bower_SustainableEnergy_ book.pdf Accessed on 05 November 2016. capability and access to new and emerging technologies. For 13 Memorandum of Agreement between the Department of Energy Republic of the solar power, barriers include high upfront cost for technological Philippines and the Ministry of New and Renewable Energy Republic of India on requirements, large land area, as well as the need for additional Enhanced Cooperation in the Field of Renewable Energy. http://www.mnre.gov.in/ research and development and capacity building on other mous/mou-philippines.pdf Accessed on 25 January 2016. 14 technologies such as the concentrating solar thermal power and Feed-in Tariff is a policy mechanism provided by the government wherein qualified developers of emerging renewable sources are offered a fixed rate per kWh of their solar thermal cooling/heating technology. electricity, excluding the energy for their own use to encourage the development of the renewable energy industry. The DoE also acknowledges that renewable energy development 15 Philippine Energy Plan 2012-2030. https://www.doe.gov.ph/sites/default/files/ in the country is faced with complex procedures in obtaining pdf/pep/2012-2030_pep.pdf p. 3. 16 permits that contribute to project delays. In addition, there is BOI approves investment in renewable energy. Official Gazette. http://www.gov. a lack of harmonization and standardization of administrative ph/2016/03/11/boi-investments-renewable-energy/ Accessed on 20 February 2017. 17 Ibid. processes at the national and local levels, causing even more 18 Fajardo, Jose Edmundo; Ruales, Marilou; Wilhelm, Bruno. 2014: Solar PV 18 delays for developers. It is also imperative that the Philippine Guidebook Philippines: Legal and Administrative Requirements for the Development government streamline and organize its processes to reduce and Connection of On-grid Solar PV Projects in the Philippines. Manila, Philippines: bottlenecks and entice more investments. Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. FOREIGN SERVICE INSTITUTE 5/F, Department of Foreign Affairs Building, 2330 Roxas Boulevard, Pasay City 1300, Philippines

www.fsi.gov.ph

Fsi philippines

@Fsiphilippines